Correlation Between Bajaj Healthcare and Banka BioLoo

Can any of the company-specific risk be diversified away by investing in both Bajaj Healthcare and Banka BioLoo at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bajaj Healthcare and Banka BioLoo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bajaj Healthcare Limited and Banka BioLoo Limited, you can compare the effects of market volatilities on Bajaj Healthcare and Banka BioLoo and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bajaj Healthcare with a short position of Banka BioLoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bajaj Healthcare and Banka BioLoo.

Diversification Opportunities for Bajaj Healthcare and Banka BioLoo

-0.54

Correlation Coefficient

Bajaj Healthcare  Banka BioLoo

Excellent diversification

The 3 months correlation between Bajaj and Banka is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bajaj Healthcare Limited and Banka BioLoo Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banka BioLoo Limited and Bajaj Healthcare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bajaj Healthcare Limited are associated (or correlated) with Banka BioLoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banka BioLoo Limited has no effect on the direction of Bajaj Healthcare i.e., Bajaj Healthcare and Banka BioLoo go up and down completely randomly.

Pair Corralation between Bajaj Healthcare and Banka BioLoo

Assuming the 90 days trading horizon Bajaj Healthcare Limited is expected to generate 1.03 times more return on investment than Banka BioLoo. However, Bajaj Healthcare is 1.03 times more volatile than Banka BioLoo Limited. It trades about 0.04 of its potential returns per unit of risk. Banka BioLoo Limited is currently generating about 0.03 per unit of risk. If you would invest  39,002  in Bajaj Healthcare Limited on September 26, 2024 and sell it today you would earn a total of  17,728  from holding Bajaj Healthcare Limited or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.57%
Values	Daily Returns

Bajaj Healthcare Limited  vs.  Banka BioLoo Limited

Bajaj Healthcare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bajaj Healthcare Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Bajaj Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Banka BioLoo Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banka BioLoo Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bajaj Healthcare and Banka BioLoo

The main advantage of trading using opposite Bajaj Healthcare and Banka BioLoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bajaj Healthcare position performs unexpectedly, Banka BioLoo can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Banka BioLoo will offset losses from the drop in Banka BioLoo's long position.

The idea behind Bajaj Healthcare Limited and Banka BioLoo Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.